Tuesday, November 27, 2007

Q. Let’s start at the very beginning. From a single store in Andheri, Mumbai, to 19 stores across India, how has the Shoppers’ Stop journey been? When Shoppers’ Stop was started, did you expect it to become the national network it is today?

A. Quite frankly, no, at that point, I didn’t anticipate that it would become this big! Before joining Shoppers’ Stop, I was managing around 128 stores for the footwear chain, Carona. Back then, my vision was that instead of running over 100 stores measuring 50,000 square feet in all, why not run one store, measuring the same? This is how I joined the Rahejas.

The Rahejas had a property which they wanted to make commercially viable. The group saw an opportunity in retail, which is how Shoppers’ Stop came into being. At that point, I really didn’t have much clue on how to run a departmental store! I just went with what I learnt from books and newspapers and relied on the Rahejas’ knowledge on international retailing.

Towards the end of 1995, we opened our second store. Till then, we didn’t have any national vision. That vision was formed only around 1996-98, which is when we opened our Hyderabad store. Only after 1998 did we go in for a national presence.

"When we started Shoppers’ Stop, everything was a challenge! Retail was only an art then; the science of retail, which we see today,was completely lacking."

Q. Shoppers’ Stop was started at a time when organised retail was in its infancy. What were the challenges before you then?

A. Oh, everything was a challenge then! (Laughs) Today, when one talks of retail, people say, ‘Yes, but…’, while back then, the situation was ‘If…, but…’.

At that time, 99 per cent of Mumbai’s retailers were Kutchis (Gujaratis hailing from Kutch), while the largest retailer in the city was Akbarally’s. So, the belief that a professional could run a retail business was largely perceived as a case of ‘suitwala dukan chalayega’. There was nothing like store planning or organised layouts. Retail was only an art then; the science of retail, which we see today, was completely lacking.

Personally, I think we were trying to open up an industry which existed, but in which nobody believed. One of the biggest challenges for us back then was recruiting people as no one wanted to foray into retail. The first six-seven months, therefore, were the toughest.

Once our team was in place, running the operations was not an issue, as it was internal. The problem lay in external perceptions. Now, around 15 years later, the situation is exactly the reverse. The consumer is all gung-ho, but are the retailers internally ready?

Anyway, we started off as a purely menswear store and became a departmental store much later. We had four options before us. Shoppers’ Stop could start off being a departmental store such as Akbarally’s, but that was ruled out because we couldn’t run such a store with 4,200 square feet, to begin with! It could be an electronics store such as Vijay Sales, but that, too, was ruled out. It could also be a supermarket, where we had KDs for reference. That looked good, but the margins in such a set-up were quite low then. So, we went with the fourth option – apparel. We decided to stock only menswear as we’d be the biggest men’s apparel store in town then; Raymond was the biggest at that time. We did a lot of research at that point to find out the issues in the industry and what customers were looking for.

So, on October 27, 1991, we formally commenced operations with our first shop at Linking Road, Andheri. I clearly remember… that was around eight days before the Diwali celebrations.

Q. What’s the thought behind adding the tag ‘Customer Care Associate’ to every staff member’s designation, including yours? How has a customer based orientation to the organisation proved fruitful over the years?

A. There are two parts to this answer. Firstly, to tell you quite honestly, most of us in the organisation didn’t have a clue as to what the retailing business was all about; our customers are the ones who taught us that. It’s not just our marketing, even our merchandising is based largely on customer feedback. I remember this customer telling me that while he loved Shoppers’ Stop, he hadn’t shopped there for a while because he couldn’t find any orange coloured shirts in our stock. We hadn’t thought it necessary to stock these, as the perception was, ‘Who buys orange shirts?’ But we went with what he said and stocked some. Within a matter of time, the entire range got sold out. And that’s just one example of how customers shape what we do.

The second story runs thus: I lost this great store supervisor once, which made me think. This guy was about to get married and his mother-in-law had a problem with his designation, which was that of ‘salesman’. As a result, he put in his papers. That’s when I realised that we needed to change the designations we give to our people. That’s how that tag was added.

In fact, this was one of the ways of motivating our staff and reminding them that customer satisfaction is of utmost importance. If the media sends us an e-mail, we may take time replying. But if a customer sends us an e-mail, I will make sure the query is attended to promptly. And this system has worked for us.

We even map regularly the following three indices, which appear in our balance sheet: Customer Satisfaction Index, Employee Satisfaction Index and Partner Satisfaction Index (for our stakeholders and partners). We also have a two-day open forum every year, where people can toss their questions and complaints to the top guys in the organisation, who sit on a dais, ready to brave it out. We have always tried to ensure transparency in our dealings, which is one of our integral values.

"Personally, I think we were trying to open up an industry which existed, but in which nobody believed. It was also a huge challenge to recruit people back then because no one wanted to foray into retail."

Q. How did you market Shoppers’ Stop initially? How did the campaign idea emerge and how has it evolved over the years?

A. Internationally, in most parts of the world, retail is built mainly by merchandise and not by marketing, whereas in India, marketing avenues such as press, outdoor and events are used extensively to build a retail brand. We personally dropped into various shops, posing as customers, to get in-depth understanding of what consumers want. We discovered one thing in common: All our boys who went into these shops came out talking about their experience of shopping. And that is how our first campaign idea emerged: ‘Shoppers’ Stop: The Ultimate Shopping Experience’. That was something that we essentially wanted to say.

After four-five years, we went back to the customers and took their feedback. We realised we could no longer continue with our earlier statement, as customers were telling us what they felt while shopping. We then twisted our punchline and made it revolve around the customer. Thus, ‘Feel the Experience while You Shop’ became our new mantra.

Last year, in 2005, we again revisited our positioning and got inputs from our customers. What a typical customer was telling us was, “The experience is already there. I want something more.” So now, we have adopted the platform, ‘Beyond Shopping’. So, you see, our whole journey has revolved around what our customers feel and the insights they provide.

Over the last three years, and particularly after the ‘Beyond Shopping’ campaign, our same store sales growth has increased from 9-11 per cent to 17 per cent; in the last quarter, we registered 24 per cent sales growth and that too with a huge customer entry jump.

It works this way: You connect with the customer and, after some time, he grows bigger than you. So, you go back to the customer and find different avenues to revive the connectivity. It’s an ongoing process.

Q. It is believed that the trademark black and white logo and campaign for Shoppers’ Stop happened because of a lack of budget! Is that true? It sure seems to have worked for the brand...

A. Yes, that’s true! (Smiles) Our ad agency, Contract, had faxed us a colour layout of the logo. But since we had a black and white fax machine, I saw the logo in black and white. But I loved it immediately. I had no clue it was colour in the first place! I honestly thought this is what the agency had intended it to be. Besides, our budget was Rs 14 lakh and a coloured logo would have cost us Rs 28 lakh – double of that.

Yes, it was a risk for us to go all black and white while other fashion brands were all about colour. But then, in the first three years of our start-up, everything was a risk. But our differentiation, which was accidental, mind you, worked in our favour and became our strategic tool.

Having said the part about our fair share of risks, I must add here that we weren’t reckless in any way. In fact, we’re a fairly conservative company. I guess we’re not the most aggressive player in the country, but then, so be it. That’s the way we are.

"No, HyperCITY is not an answer to Big Bazaar or Spencer’s in any way."

Q. The brand, Shoppers’ Stop, is spelt differently in different places. Why is it so? Don’t you think this is hazardous for the brand?

A. Well, it is spelt in two ways and I’ll tell you each instance. In the logo and within shops, it is spelt with an apostrophe after ‘s’ in the word ‘Shoppers’, whereas in the books of the Registrar of Companies, it is spelt with an apostrophe between ‘r’ and ‘s’ in the same word. See, we can design the logo the way we want, but when we went to register Shoppers’ Stop Limited, it had to be spelt as per British English, which is why it was registered as ‘Shopper’s Stop Ltd’. But that part is not exposed to the customers at all.

But if you’re saying that it is spelt wrongly in the shop environment, which I doubt, then that is an error on our part, which we need to rectify immediately. It can cause confusion, no doubt. We’ll sort it out soon, now that you have brought it to our notice! (Grins)

Q. In a price sensitive market such as India, can shopping malls beat ‘kirana’ stores just on the basis of ambience and shopping experience? Do you see this competition moving beyond just a price war?

A. One has to see things differently. ‘Kirana’ stores target the 700 million belt, whereas organised retail services the 300 million one. To apply the same rules at both places, when they cater to two different sets of people, would be unfair. Let me explain the difference.

In the 300 million belt (non-food segment), consumers are almost global, that is, they have moved from price to value. One will be surprised to find the substantial number of people who buy, say, a Mercedes, in Mumbai, but get it registered from Thane. This is to save a lakh of rupees, despite the fact that they spend around Rs 40 lakh on the car. So, this segment is more value conscious, as they will buy the most expensive item, and simultaneously will want to get the best price for it. A price conscious consumer, on the other hand, will look at price alone and opt for a product which is the cheapest.

In the same belt (food segment), the consumer’s taste and choice are becoming global. And this is being driven by the media. I will give a small example. There are many cookery shows on television where they demonstrate continental cuisine. Now where will the consumer get the ingredients for these recipes – only at the supermarkets. However, I will also say that although the taste of the consumer has become global, the supply chain is still not global.

What I can foresee is that as the number of SKUs and options increase, consumers will demand more and limitation of space will become a problem for the ‘kiranas’. Perhaps, what will happen is that the generalised retailer will convert into a specialised one. So, the special ‘paneer’/cheese centres which you have today will become even more popular, and their biggest competitors in that regard will probably be the food bazaars.

To answer your question specifically, I think the ‘kirana’ store will be around for the next 30-40 years easily, as it is the neighbourhood store and convenience works in its favour. It also has two channels to buy from – traditional suppliers and hypermarkets. But SKUs will be a big problem area for it.

To conclude, the ‘kiranas’ are under a format and product threat, but not under any business threat.

As far as the price war theory goes, here are my views. Organised retail makes a person buy more for the same amount and offers tremendous scope for impulse shopping, which is very limited in a ‘kirana’ store. If we remove this impulse shopping factor, the consumer saves bucks at a hypermarket. For instance, if a person buys something at a ‘kirana’ and buys the same thing at a hypermarket, with no room for impulse shopping, he will save almost 5-10 per cent in the latter case. But that’s perhaps theoretical; one winds up doing impulsive shopping after seeing so many things on display! (Laughs)

"Internationally, in most parts of the world, retail is built mainly by merchandise and not by marketing, whereas in India, marketing avenues such as press, outdoor and events are used extensively to build a retail brand."

Q. With the relaxation in the FDI regulations, the big foreign players such as Wal-Mart, Carrefour, Tesco and Home Depot are just around the corner. Smaller players in India seem to be perspiring at the thought and strategising on the way ahead. How will Shoppers’ Stop hold its own before these big fish?

A. I strongly believe that in retail, the winner doesn’t take it all. And this applies globally, too. Let’s take the example of a big giant, Wal-Mart, in the US. The fact is it has an approximate 9.8 per cent share of a $3 trillion market! Maybe we need to look at why Wal-Mart was not successful in Germany and Korea, or why it was successful in some other markets. It all boils down to market dynamics. You can’t take one model and apply it elsewhere.

Anyway, I feel that players who are weak internally will suffer as a result of this competition.

Q. In addition, even domestically, the scene is getting hot, with giants such as the Tatas, the Bharti Group and Reliance Industries eyeing the organised retail pie in India. The road sure doesn’t look simple.

A. Nothing will change for Shoppers’ Stop, not in the next 10-15 years, for sure. Shoppers’ Stop stands at 19 stores at present; it should reach 39 soon and then go up to 50. Competition will, in fact, help us. It will help expand the organised retail market. Yes, where we will compete will be in the malls, but then, let the consumers take a final call. We’d rather concentrate on our strategy and our growth plan, rather than chase our competitors’ strategies. We are aware of the competition, but aren’t sweating over it.

Shoppers’ Stop, HyperCITY and our specialty businesses will continue to concentrate on their respective goals and will be able to take on their competition due to its focus, range width and depth and consumer insight coupled with the trust we have built over so many years in the business.

"It works this way: You connect with the customer and, after some time, he grows bigger than you. So, you go back to the customer and find different avenues to revive the connectivity. It’s an ongoing process."

Q. Shoppers’ Stop, too, has ventured into hypermarkets, with HyperCITY Retail (India). Is this the answer to your competitor Pantaloon’s Big Bazaar or RPG’s Spencer’s? Do you think you have already missed the bus?

A. No, HyperCITY is not an answer to Big Bazaar or Spencer’s in any way. HyperCITY has been rated as one of the best 100 stores in the world, as per ‘Retail Week’, a magazine in the UK.

Besides, I don’t think we’re competing with Big Bazaar at all, in terms of marketplace or customer base. The two of us cater to two separate markets altogether. HyperCITY has the same TG as Shoppers’ Stop – the mid to high end segment. This is a conscious strategy because this segment has the highest disposable income… the 300 million base which I spoke about earlier. Thirty per cent of Indian consumers contribute to 70 per cent of our sales. So, do we want to chase the other 70 per cent? Not really. It’s a business strategy, nothing else.

In fact, we’re following international trends set by Wal-mart and Tesco. For instance, Tesco, which is the world’s second largest player, is entering the US market at this point.

As I said before, the winner doesn’t take all. I really don’t feel as though we have missed the bus, even though externally, the media and investors may feel that way. There is always a right moment for everything. For instance, for HyperCITY, the best real estate deals and properties, which we got today, might not have been possible a decade ago. Speed is not an issue for us… we don’t have the craze to be number one there, or number two in so and so city.

Q. Shopping malls have high footfalls. Are you satisfied with the way this medium is being used currently for advertising? Do you see a situation in which retail outlets will earn substantial revenue from advertisers and pass on a portion of this profit to the consumers?

A. I’m quite satisfied with the way retail is being used for advertising. Plasma televisions to display and promote brands catch the eyes of the customers. Promotions in the atriums and sampling and test marketing of automotive products in car parks are some other good concepts.

To answer the second part of your question, yes, it’s possible in the long run, but the end consumer generally gets his benefit from competitive pricing. Around 1-2 per cent of the bottom-line profits for retailers and mall operators will come from these advertisers.

Retail poses a great opportunity for advertisers. Conventionally, they are targeting eyeballs; here, it is footfalls. Besides, customers are in a different frame of mind altogether while shopping, which is an advantage.

"Yes, it was a risk for us to go all black and white, while other fashion brands were all about colour. But then, in the first three years of our start-up, everything was a risk."

Q. A majority of Shoppers’ Stop stores are in malls, which are characterised by higher footfalls and lower conversions. Shouldn’t Shoppers’ Stop have more stand-alone stores?

A. For one, stand-alone stores don’t provide for the same kind of parking the way malls do and, in the near future, parking will be a major issue for shoppers. In fact, there are more real estate opportunities in malls, which is why they will grow faster than stand-alone stores.

Conversions are low in malls in India as shopping is still a family thing… five people in a family may come to shop for something which only one of them wants. Thus, there is no proportion between footfalls and conversions. But that will soon change as shopping will become an individual thing.

Q. What are your plans for Crossword? What is the idea behind this celebrity launches?

A. Crossword has 34 stores, with another 11 in the offing. It should reach a target of 100 stores over the next two years. But the truth is that book retail is yet to catch up in a big way in India, as most of the publishers of books are international ones. The book distribution business is in small hands therefore the brand, product or distributors push for the title is very weak. This is why we need to have the book launches with celebrities, which has certainly helped the store’s popularity!

"I guess we’re not the most aggressive player in the country, but then, so be it. That’s the way we are."

Q. Any parting thoughts on the retail industry?

A. Quite a few. For one, retail is a very simple business.

Secondly, it’s also a loyalty led business. In fact, in the UK and Germany, 54 per cent people are loyal to a particular store. In India the figure would be in the range of 20 per cent. However, in case of Shoppers’ Stop, the loyalty contribution is more than 60 per cent.

I will also add here that more than being unique, retail is about being consistent. This is what I have learnt through my experiences all these years.

I feel that 500,000 square foot malls are the best.

In Western countries, there is this emerging trend of smaller malls and more stand-alone stores. Will it catch on in India? I would like to wait and watch.